Institutional investors in Frequency Electronics, Inc. (NASDAQ:FEIM) see US$43m decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Significantly high institutional ownership implies Frequency Electronics' stock price is sensitive to their trading actions
• The top 7 shareholders own 50% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

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To get a sense of who is truly in control of Frequency Electronics, Inc. (NASDAQ:FEIM), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 44% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to US$334m last week. However, the 114% one-year return to shareholders may have helped lessen their pain. We would assume however, that they would be on the lookout for weakness in the future.

Let's delve deeper into each type of owner of Frequency Electronics, beginning with the chart below.

See our latest analysis for Frequency Electronics

What Does The Institutional Ownership Tell Us About Frequency Electronics?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Frequency Electronics already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Frequency Electronics' historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 19% of Frequency Electronics. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Edenbrook Capital, Llc is currently the company's largest shareholder with 19% of shares outstanding. For context, the second largest shareholder holds about 7.0% of the shares outstanding, followed by an ownership of 5.3% by the third-largest shareholder.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Frequency Electronics

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own shares in Frequency Electronics, Inc.. As individuals, the insiders collectively own US$19m worth of the US$334m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Frequency Electronics. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Frequency Electronics has 1 warning sign we think you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.